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) bore the brunt of this with their provisioning costs nearly twice pre-provisioning operating profits, which resulted in a net loss of nearly Rs 85,000 crore.

Higher provisioning and the resultant losses have materially eroded the Rs 1.2 lakh crore of capital raised by PSBs last fiscal, of which Rs 90,000 crore was from the government.

PSBs remain highly dependent on the government for capital to meet Basel III norms.

“Given the higher-than-expected losses last fiscal, probable loss in the current fiscal, and recall of the Additional Tier 1 instruments by a few PSBs, the Rs 2.1 lakh crore recapitalisation program announced in October 2017 may be insufficient to meet the capital requirements of PSBs by the end of this fiscal,” Crisil said.

The agency, however, said that the tide is slowly turning. “Further, prospects of recovery from stressed accounts referred to the National Company Law Tribunal (NCLT) are improving,” said Krishnan Sitaraman, senior director, CRISIL Ratings.

“More than a quarter of the Rs 3.3 lakh crore worth of cases referred to NCLT for resolution are from the steel sector which has seen heightened bidding interest due to improving prospects for the sector,” he said.

Crisil expects moderation in slippages, better recoveries from NPAs and improved provision coverage to bode well for banks. “For example, SMA-2 (or special mention account cases, where exposures are overdue by 60-90 days), have more than halved to about 0.8% of advances as of last fiscal-end, compared with around 2% a year before, indicating considerable reduction in stressed loans that can potentially regress into NPAs,” it said.